All right, Tom, I think we're ready to go. Over to you.
Hello, everyone. Welcome to the Fluence Q3 2025 quarterly conference call and activities report. As Andrew said, I am Tom Pokorsky, CEO and MD, and with me today is Ben Fash, our CFO. We continue to make progress on our one Fluence strategy and our growth plans in the higher margin market sectors. Our year-to-date revenue at the end of Q3 was over $52 million, which represents over a 70% growth from Q3 of year-to-date Q3 of last year. A good deal of that increase is, of course, due to the fact that the Ivory Coast addendum continues to progress, which was stalled last year for most of the year. However, we also saw about a 26.6% growth in our SPS revenues, which is a critical part of our growth plans in our new strategy.
Our EBITDA for the first three quarters is $1.2 million, representing a growth over the last year of about $2.6 million for the quarter and $6.2 million year to date. A significant amount of the increase is due to the increased revenue from IBC, which is Ivory Coast, excuse me, we did have EBITDA growth in all of our units except for the industrial water and reuse, who basically had a strong first half last year, but they will also end up growing this year at the end of the year. The gross margins in our key business units continue to grow, but the year-to-date gross margin is a bit less than last year because of the significant revenue contribution of Ivory Coast, which has a much lower margin than the rest of our business, as you are well aware.
However, we continue to make progress on right sizing of the business, and our SG&A is coming in at about $800,000 less year to date, which is about 5% less than the first three quarters of 2024. Our order bookings were strong in Q3 at over $17 million, or nearly about 10% higher than Q3 of last year, which gives us a backlog of over $75 million at the end of the quarter. We also expect Q4 to be a strong booking quarter, which is important as we also expect revenues to be strong in the fourth quarter, and we need to keep adding to backlog to start next year. This all adds up to us maintaining our guidance for the year of between $80 and $95 million in revenue and EBITDA of three to five, albeit I think we'll be at the lower end of that guidance.
Before I turn over to Ben to dive deeper into the financials and cash flow, I'd like to comment on a few key wins of the quarter in early October. You may recall that a significant part of our growth strategy is the one Fluence strategy. That is a strategy where, instead of having each individual business unit work almost on their own, we are trying to work as a global company with all business units cooperating with each other. I think some of the wins that we pointed out in our key recent orders for Q3 and October are a good example, and I'd like to point out or highlight a couple of them. First, there was a $2.2 million order for a beef processing plant in Brazil.
This was a job that was originated by our Italian operation, and it was an IWB project that had to overcome some tax and tariff issues in Brazil because they were from Italy. By working jointly with our IWR unit in Argentina, we were able to maintain a reasonable competitiveness on the project, and we won the job. Without the cooperation between the two, I do not believe we would have carried that job. The next project I'd like to highlight was the one we just announced yesterday in Saudi Arabia. It's a project called Karaya. It's a power plant in Saudi Arabia. It's a water treatment plant for a power plant in Saudi Arabia. Technologically, it's not a big challenge. It's a reasonable design. Because of the power plant situation, there are significant documentation requirements and engineering requirements that have to be put in place.
In addition, it's got a very tight timetable. We were concerned that this project would cause us issues in carrying out the project, and we engaged our industrial water group in Argentina to work on it with our municipal group, who happens to manage the Mideast group, which is where the order originated. Between the cooperation of these two units, our industrial water group will do the project management, the engineering, and the documentation on the job, which will be done quickly and efficiently because they are very experienced in that kind of work. Again, the cooperation between business units really helped land a $12.2 million order, which is officially under our municipal group, but it will be carried out by the municipal and the industrial water group. These are important wins for us, and they would not have been there without the cooperation of multiple business units.
It's starting to show positive numbers out of our one Fluence strategy. In addition, finally, I'd like to point out a couple of other significant orders on that list. One of the other parts of our strategy was to grow North America, in particular grow it with the MABR group, which is our municipal group, and the MABR technology. You'll note there's a $2.3 million for an Idaho real estate development, and it's an MABR project of decentralized containers, but it's a significant MABR order in another state in the United States. As I've told you before, each state requires various approvals to get technologies approved. We are making headway and got a significant order out of it. That's a big win for us moving forward in North America. You'll notice on the list there's a couple of small jobs. We also got an MABR in Hawaii.
We got an MABR in Jamaica out of the North American group. Our strategy to grow the North American market, especially with our MABR technology, is proving sound. I'm very pleased at the progress we're making in our new strategy, and we're now starting to gain traction, and it's starting to show up in our numbers, which is important to all of you, of course. Now I'd like to turn it over to Ben to do a deeper dive on the financials, the cash flow, and he'll probably go into the segment financials too. Ben, do you want to take it over?
Yeah, thank you, Tom. Good morning, everyone. As Tom said, my name is Ben Fash. I'm the CFO of Fluence, and I'd like to welcome everyone to our Q3 2025 business and financial update. As always, we appreciate your time today and your interest in Fluence, and I'm going to hit on a lot of the factors that Tom talked about, maybe dive into a little bit more detail, particularly at the business unit level. As Tom said, Q3 was our strongest quarter of the year, and the company has also performed very well on a year-to-date basis. We've significantly outperformed the three quarters of 2024 and have positioned ourselves really well for a strong finish to the year in fiscal 2025, as we anticipate an even stronger Q4. Year-to-date revenue was $52.4 million, which was $22.1 million or 72.9% higher than the same period in 2024.
Clearly, the increase in revenue from the Ivory Coast addendum project is the biggest reason for this strong growth, as it went up by $18.5 million compared to the prior year. As Tom noted, our SPS and recurring revenue is also experiencing double-digit growth. More importantly, Q4 is expected to be the strongest quarter of the year in terms of revenue contribution, and that's due to a number of our backlog projects accelerating, combined with the continued progress of the Ivory Coast addendum project. As a result, we're forecasting strong EBITDA in Q4 and fiscal 2025 overall. As a result of the revenue growth in the quarter, EBITDA was $1.2 million in Q3 and on a year-to-date basis. That represents an increase of $2.6 million over Q3 of last year and $6.2 million when you measure it against the year-to-date period.
In addition to the revenue growth the company has experienced on a year-to-date basis, we have also been able to continue to control costs, as we saw an $800,000 reduction in SG&A and R&D, and that also contributed to the EBITDA growth on a year-to-date basis. Gross margins were 28.8% year-to-date Q3. That represents a reduction of 3.0% compared to the prior year, but that's mostly due to the lower gross margins related to the Ivory Coast addendum project and the large revenue contribution that project has. That said, the gross margins across our core businesses continue to perform well. Municipal, industrial water and reuse, and industrial wastewater and biogas all improved their gross margins on a year-to-date basis compared to the same period last year, illustrating the margin strength of our high margin SPS and recurring revenue segments.
Each of these business units have benefited from positive project margin variances. As well, we also had several accrual reversals in the quarter from some historical projects. All business units, other than industrial water and reuse, saw EBITDA growth through the first three quarters of the year, and I'll talk about that in a second. The Ivory Coast addendum contract obviously contributed the most, with $2.6 million of EBITDA through three quarters, compared to a loss of $0.4 million in the year-to-date period in 2024. Industrial wastewater and biogas saw an EBITDA increase of $0.8 million in the year-to-date period, primarily on strong revenue growth. They're up $3 million on a year-over-year basis.
Municipal water and wastewater saw revenue and EBITDA growth of $1.3 million and $1.1 million, respectively, through the first three quarters of this year, in part due to some positive project margin variances, as well as a few accrual reversals on some historical projects. Southeast Asia and China is ahead of prior year as well on a year-to-date basis, both in revenue and in EBITDA, and it's expected to reduce its EBITDA loss in fiscal 2025 by as much as half. While industrial water and reuse is just modestly behind its performance, both in revenue and EBITDA through the first three quarters of this year, that is mainly due to some lower spare parts revenue in the first half of the year.
The business is forecasted to finish 2025 in line with its numbers from last year and, frankly, maintain the highest EBITDA margins of any business unit in our company. The business continues to perform very well. Lastly, corporate cost savings of $0.8 million, which we've seen in our SG&A and R&D, obviously also contributed positively to our EBITDA through the first three quarters of 2025. I'm going to just flip ahead to a slide here. Excuse me. In terms of orders, Fluence Corporation booked $17.2 million and $39.7 million in Q3 and on a year-to-date basis through Q3 of this year. That represents, on a quarter-over-quarter basis, 9.6% growth and a modest reduction of 1.9% on a year-to-date basis.
As Tom had talked about, the large Karaya power plant project that we just booked this week will more than make up for that slight decrease on a year-to-date basis through October. Even through Q3, municipal water and wastewater in North America, industrial water and reuse, industrial wastewater and biogas, and Southeast Asia and China saw a combined increase in orders through the first three quarters of $13.4 million or almost 50%. Q4 is actually forecasted to be our best quarter of the year in terms of orders and exceed Q3 2025, which was our best quarter to date. As a result of those orders, our backlog as of September 30 is $75.7 million. When you take a look at the year-to-date 2025 revenue, plus the backlog forecasted to be recognized in 2025, you get to $76.5 million.
Add another $3 million of recurring revenue that we expect in the quarter, and we're over $79 million. Most importantly, of that backlog, over $50 million of it is forecasted to be recognized in 2026 and beyond. As Tom said, given the strong backlog position, the company's forecasting really strong revenue growth for fiscal 2025. We're maintaining our guidance, both of revenue of $80 to $95 million and EBITDA of $3 to $5 million, noting, however, that we are likely to finish the year closer to the low end of the range. Just on the cash flow front, the company had another really strong quarter. We ended Q3 2025 with $14.1 million in cash and $4.1 million in security deposits. Our operating cash flow in the quarter was $2.2 million, and on a year-to-date basis, totaled $7.1 million.
This is primarily due to collecting about €4.2 million related to milestone five of the Ivory Coast addendum in late September 2025. Even though that collection came in late, that really meant that we made a collection but had not yet settled a number of payables that were related to that collection. Therefore, we're forecasting Q4 2025 to have negative operating cash flow. However, for the full year of fiscal 2025, our operating cash flow is forecasted to remain positive. Lastly, I wanted to give an update on Ivory Coast. Commissioning on the main works is now effectively complete, with the exception being the stabilization of an embankment for a pipe crossing of the swamp. This will largely be completed in parallel with the addendum works, which we're now working on. This work is expected to commence in Q4 of 2025.
The addendum works are currently progressing on budget, largely on schedule. However, this embankment stabilization work and pipeline crossing has experienced some delays in recent months. The work is expected to start in Q4, as I noted, at which point the project will try to make up some of those delays as it progresses toward completion. Financially, the addendum project is progressing well through Q3 2025. Revenue is in line with forecast, and it's a cash flow positive project. As of September 30, the company had collected five milestone payments under the addendum, totaling €30.3 million. That represents about 63% of the total payments. We are expecting the next milestone payment in November and it has already been approved. Fluence is continuing its efforts to secure a long-term O&M contract for the plant as well.
Negotiations will commence in the coming weeks after the technical proposal and business plan is submitted to the government and is reviewed. The start of the long-term O&M contract requires the addendum works to be completed before the plant can begin producing water. Fluence is currently maintaining the plant on an interim basis, which positions the company well to be awarded the long-term O&M contract currently being negotiated. In conclusion, Fluence continues to progress its strategic transformation through Q3 and 2025, and has demonstrated significant growth compared to the same period in 2024. We're also very well positioned for the strongest quarter of the year in Q4, which would result in a strong fiscal 2025 overall. We remain encouraged by the outlook for Q4 and into 2026, particularly with the strong start to order bookings in Q4 with that $12 million Karaya order.
Orders are expected to continue to be strong through the rest of Q4, and we're forecasting to have our strongest order booking quarter of the year. The business has enough work to deliver on its revenue and EBITDA guidance as long as we don't experience any material project delays. Combine that with the healthy and growing gross margins in our core businesses, a lower cost base, better cash management practices, and management remains optimistic about the opportunity to build sustained profitability and positive cash flow. At this time, I will throw it back to you, Tom, for any concluding remarks, and then we can take questions from the webcast participants. I want to thank everyone again for your time and your continued interest in Fluence.
My only concluding remarks is a couple of years ago, we put in place some new strategies, and while it took a bit to turn the big aircraft carrier around, I believe we have turned it, and we are moving forward in a real positive fashion. We continue to book nice orders with higher margins, and I think the outlook for the future is very, very good. With that, if there are questions, we can bring them up and look at them and answer them.
Yeah, thank you, Tom. I'll moderate the Q&A here and toss some over to you that might be appropriate or answer them myself.
Okay.
The first question was, you mentioned a tight timeframe on the Saudi project, I think referring to Karaya. Can you please provide some further detail on timeframes for the project? Tom, why don't you take that one?
Sure, sure. Karaya is scheduled to start immediately. In fact, we've already had the kickoff meetings on it. It is scheduled to be complete, I believe, in the first half of 2027, with the majority of the work being carried out throughout 2026. The 2027 work is largely related to startup and performance testing, so the bulk of the work will be done in 2026. Quite honestly, with all the documentation and approval requirements, typically for a power plant project, that is a very tight time schedule. It's not that tight to build the product. It's tight to go through all the paperwork to get started building the product. We expect to take a significant part of that revenue in 2026, with a little bit in early 2027, which is mainly startup and warranty work and things like that. It's less than an 18-month completion for a $12 million order, which is pretty tight, in my opinion.
Yeah, thanks, Tom. When is the production facility in the U.S. due to be commissioned and start production?
You want me to take that, Ben?
Yeah, why don't you take that, Tom?
That's a very good question. We are ready. We have the equipment in place, we have the lease ready to sign, and we are not meeting the demand of that plant just yet. We have been strategically delaying a little bit ourselves to stop the cash flow requirements until they're needed. We expect that to be complete by year-end.
The other thing I'd say for that as well is, as Tom noted, the demand for production out of that facility is not required at this moment in time. As we start that plant up, initially, it's likely that the costs to produce the membrane are going to be higher than our Chinese plant. Even with the tariffs that we have in place or that are in place right now, and that situation has largely stabilized, the cost of production is still lower coming out of that plant. In part, due to remain competitive on our bids, we will likely fulfill a lot of our MABR demand through that facility as we start that facility up.
Yeah, and I'll add a comment on that, Ben. The bottom line is all of the MABR projects we have in North America currently are typically private entities, not municipalities. One of the biggest reasons we need a U.S. membrane manufacturing facility is because of the Buy American clauses for municipal-funded contracts. Those projects take multiple years to go forward. We have a number of them in our pipeline, but they're not needed just yet. All the Wilshire Road, the Spring Rock project, the Hawaiian project that I talked about, they all have—they're all private, so they don't have to comply with the Buy American. Since it's cheaper for us to deal with China, where we have the membranes built, we are building them there.
By the way, the team did yeoman's work to try and deal with the tariff requirements, and we didn't get hurt badly at all on the tariffs with all the hoopla involved. The one municipal job we did get for membranes was San Leandro. They got a—what do you call it—a bypass from the laws to do that project. They got an exemption. Exemption is the word I'm looking for. We could still build that in China, and that's where it was built. It's coming, and we got to get it done. We're trying to save as much cash as we can and save the expense until we need it. We're ready to go. We're just holding off until we absolutely need it.
Okay. Tom, this next one is for you as well. Can you talk through the demand from livestock/dairy farmers and similar industries in the U.S. for wastewater-to-energy plants?
That's a very good question. We are having a lot of demand everywhere else in the world, but the U.S. right now. There are a lot of preliminary projects being set up in our pipeline for dairy and wastewater. We got one dairy job in the U.S., but beef producing and poultry producing, we haven't gotten yet. We had thought there would be a faster movement because of a previous law passed a couple of years ago called the Inflation Reduction Act, where they put a lot of money into renewable energy projects in the form of tax credits. It appears those projects just didn't take off yet. They're in the pipeline. We're working on them, but they didn't go forward. We still do see a large potential, but they just haven't come to pass in the U.S.
We are getting them in Ecuador, in Brazil, in Italy, and in Spain. Other parts of the world, they're moving forward, but it appears North America is just a little slower than we had hoped.
Okay, next few questions.
They're still going to come. They're still going to be there. I don't know what the reason is, but they're just slower to develop in the U.S.
Yeah. I'll take the next few questions here, Tom. Will the anticipated debt refinancing be finalized this calendar year or more likely next year? It won't get finalized this year. We're targeting the facility matures in Q2 of next year, and that's when we're targeting refinancing that facility. There's a question. I lost connectivity, but is there any 2026 guidance in which region showing the greatest potential for growth over the next year or two? We have not provided any guidance on 2026. We did provide a backlog number, but are not going to be providing guidance at this point in time for 2026. Another question on this line. Fiscal 2026 backlog to revenue forecasted at $50 million. How much of this relates to Ivory Coast? We expect we'll finish the year with about $12 million of Ivory Coast backlog to start 2026.
Are you in the running for AI-related projects? Was this the recent $12 million win? Was it AI-related? I think referring to Karaya. I'll maybe answer, and then, Tom, you can follow on with that. I would say the reality is that the thirst for increased power generation is very significant. There is a lot of demand for increased power generation for AI, for many other industries as well. It's not just AI, even though that's kind of the buzzword that's out there. You know we don't have any insight as to exactly who is the main buyers of this power, but Saudi is certainly a leader, we know this, in trying to attract AI data centers and other high-energy-consuming industries. This is one of many contracts that are out there and available in terms of power generation, and the water demands associated with it are very, very high. Tom, anything you'd add to that?
Yeah, I think both in general, electricity production is growing dramatically because of AI and other reasons. Currently, the company we signed the purchase order with, Karaya, has got two other power plants that are going to be working on very similar to the Karaya plant. They are dealing with billions of dollars' worth of power plants right now, and it does give us the possibility of adding multiple orders with that same client if it works out okay for them and then for us. I can also tell you in the U.S., there are these data centers being built all over the country, and they're a major source of news right now.
In my home state in Wisconsin, we have three of them on the drawing boards, and all three are being argued with these local municipalities about where they're going to get the power and the water for them. There's a significant amount of water treatment. We have in our pipeline a number of data centers for water treatment and a number of power projects for water treatment for power projects. I believe it's going to be an explosion in the future. I really do. Right now, they're all pipeline projects for us.
The great news is we have decades of installation history in this space and many recent wins that kind of demonstrate our capabilities. One of the things, again, going back to Tom Pokorsky's earlier comment around One Fluence, you know what we're now accessing is these global opportunities, but leveraging the expertise that we have out of our industrial water and reuse group in Argentina. Having them be part of the sales process, even if it's a lead that they didn't generate initially, is tremendously valued, and it's what the customers value ultimately. They want to see that you've done it, done it several times, and done it successfully.
Yeah, I think if I'm not mistaken, Ben, we have three power plant projects in our backlog right now that we're working on. I think Karaya is one, right?
Yes.
Karaya, and there's one in Argentina, right?
It's Aniva. Yes.
Aniva, yeah, we're doing a lot of work in the power industry right now, and I can only see it growing.
Yeah. Okay. There are no additional questions that came in. As usual, we want to thank everyone for their support and their interest, the questions, and the engagement. At this point in time, I think we'll conclude. Any parting comments, Tom?
Other than that, I am very, very pleased right now that we are moving in the right direction. As I said before, I think we turned the big ship around, and it's moving in a positive direction. There is a lot of good outlook out there, and we're very pleased with our progress and what the future holds. I thank you for your support and your interest in our company, and we'll continue to work hard to improve it.
Thank you, everyone.
Thank you for tuning in. I appreciate it.